The Economic Crime and Corporate Transparency Act 2023 (“ECCTA”) was the UK Government’s second landmark piece of economic crime-focused legislation to pass following the Russian invasion of Ukraine. As its measures begin to take effect, it’s a good time to reflect on what they mean for the AML-regulated sector.
Overview of the Act
The ECCTA, which received Royal Assent on 26 October 2023, introduced measures to:
- strengthen the ‘gatekeeper’ role of Companies House
- combat the abuse of limited partnerships
- facilitate information sharing amongst the private sector
- strengthen law enforcement powers to seize crypto assets, and
- reform corporate criminal liability for economic crime offences including by introducing the new failure to prevent fraud offence.
While the Act sets out important new powers for law enforcement and regulatory authorities, the reforms with the broadest potential impact for the regulated sector relate to Companies House, information sharing and corporate criminal liability.
Tracking implementation
1) Companies House
The first set of changes to the operations of Companies House took effect on 4 March. Companies must now provide a registered office and email address and confirm that the company is being formed for a lawful purpose. They also empower Companies House to proactively query information, remove factually inaccurate information and share data.
At a later stage, Companies House will require identity verification for all new and existing registered company directors, People with Significant Control and those filing on behalf of companies.
Overall, these changes seek to instil greater confidence in the data holdings of Companies House, combatting its misuse. In the future, if implemented and embedded effectively, with appropriate support from regulators, businesses may also be able to place greater reliance on data obtained from Companies House.
2) Information sharing
The ECCTA’s reforms to information sharing, which took effect in January, are designed to allow certain businesses to share information amongst themselves to prevent and detect economic crime. This a long-sought change by industry which will hopefully drive proactive collaboration between firms to identify and combat economic crime.
While the new measures are only at an early stage, experience suggests firms will need time and support to overcome previous data privacy concerns before sharing sensitive customer information. Other challenges remain, as the allowances also only apply within the regulated sector and will not permit social media and other platforms to share information. While the proportion of frauds that originate through these channels remains high, these reforms may remain incomplete.
3) Corporate Criminal Liability
While the introduction of a new failure to prevent fraud offence has captured attention, in one of the ECCTA’s less high-profile changes, reforms were made to the corporate criminal liability regime to simplify the process for prosecuting organisations for economic crimes. From December 2023, rather than requiring authorities to identify the individual who is the ‘directing mind and will’ of the entity to attribute conduct to the corporate, it is now sufficient to identify a responsible ‘senior manager’.
The longer-term impact of these changes remains unclear. However, firms should ensure they begin identifying those individuals who fall within the definition of a ‘senior manager’ and provide them with appropriate training.
Looking forward
The measures in the ECCTA are an important step but effective implementation will be key to their success. In the meantime, firms should be reviewing their financial crime policies and procedures to make sure they are fit-for-purpose.
Further regulatory changes are also on the horizon as the rest of the ECCTA takes effect. More broadly, the government has committed to reforming the UK’s AML supervisory system as part of the 2nd Economic Crime Plan and we can anticipate ongoing regulatory updates in the lead up to the UK’s next FATF Mutual Evaluation in 2027. This process has already begun with the recent publication of the latest HM Treasury consultation on improving the effectiveness of the Money Laundering Regulations. For the time being at least, change will be the only constant in the UK’s economic crime regime.
If you have any questions or want to talk about any of the above in more detail, please don’t hesitate to contact us.
